March 26, 2003

The uncertainty over the evolving war makes interpretation impossible. It also postpones economic action until more certainty arrives.

The stock market is still attached to a bungee chord, except that the volatility of the jumps is less certain. The Fed's beige book is on a downer, exhausted from trying to be Delphic in its projections. Delphi is a ruin of what it used to be and so are projections on stocks and bonds.

February's job numbers were as chilly as latent winter weather, which perhaps contributed to it. They had to cope with climbing workers' compensation insurance costs, as well as fast-rising gasoline prices. The Inland Empire and San Diego's net new job numbers led the state. Manufacturing job losses continued to be of great concern, though government and retail jobs made strides. The Bay area continued its pain, along with L.A.'s job losses, as these areas struggle for some kind of job equilibrium.

Nationally jobs plunged by 308,000 from January to February and construction jobs sank by 48,000 (homes were still up), buffeted by bad weather and an adjusting marketplace in nonresidential areas. My counsel is not to strain your brain based on month-to-month jobs statistics until there is some pattern to them.

My last trip to speak with large New York City equity suppliers drew the following conclusion vis-a-vis real estate investments: After marking time for almost two years, they have concluded that there has been sufficient erosion in values to once again come back into the national market to search for values which make sense. While they have great sums of capital to pursue opportunities, I expect them to remain very cautious, perhaps more self-conscious of their inactivity as time has passed by.

However, this strategy has kept them from blunders, and the timing appears improved for returning to the various marketplaces. There may still be more erosion of values, but the costs will be well below replacement values, which gives them more comfort.

My recent conversations again prove the maturation of the analysts and decision makers. This is no time for impulsive reactions to what might turn out to be illusions. These are the reasons for business's failure to invest more in new plants and equipment. Also 67 percent of the nation's CFOs said that they are spending more cautiously or holding off all capital investment because of war uncertainties, according to Duke University's School of Business/Financial Executives International.

The stock market is trying to mirror the reported daily conditions in Iraq rather than any economic news, which is anything but positive. But then again, political reasoning is just as fickle as we search for anything upon which we may locate our new Delphi.